Stocks fell to their biggest-one day slide of the year as anxiety mounted over the potential for the Federal Reserve to pull back its stimulus efforts. Investors also fretted about a slowdown in the Chinese economy.Continue reading.
Worries about the Fed rattled across other markets, with gold dropping and yields on Treasury bonds marching to nearly two-year highs.
The Dow Jones Industrial Average shed 353.87 points, or 2.3%, to 14758.32, the biggest percentage drop since November 2012 for the blue chips and the largest point drop since November 2011.
The Standard & Poor's 500-stock index lost 40.74 points, or 2.5%, to 1588.19. The Nasdaq Composite Index fell 78.57 points, or 2.3%, to 3364.63.
Stocks began their decline at the opening bell, extending losses first kicked off after Fed Chairman Ben Bernanke reiterated Wednesday that the central bank could start winding down its $85-billion-a-month asset-purchase program later this year.
Traders said the selling Thursday was being led by short-term investors such as hedge funds and accelerated when the S&P 500 broke through the 1600 level. Some pointed to a single account selling a large number of futures contracts during the afternoon as fueling the decline. Others pointed to heavier-than-usual volume in exchange-traded funds as reflecting aggressive trading by hedge funds.
"Every fast-money [investor] wants out, and we're not seeing any [longer-term] funds saying 'we're buying this dip,' " said Matthew Cheslock, a trader with brokerage firm Virtu Financial.
Despite the upbeat view for the economy, the prospect of the Fed curtailing the bond-buying efforts that have helped the Dow and S&P 500 hit records this year has sent jitters through the market. The yield on the 10-year Treasury note, which moves inversely to its price, reached 2.419%, its highest since August 2011.
Home builders were slammed over concerns that rising bond yields would translate into higher financing rates for buyers. PulteGroup, PHM -9.10% D.R. Horton DHI -9.09% and Lennar LEN -7.69% slumped. All 10 of the S&P 500's sectors fell more than 2%, and every Dow industrial traded in the red.
Gold was hit hard, as its appeal as a hedge against inflation and currency weakness faded. Gold slid 6.4%, to settle at $1,285.90 a troy ounce, dipping below $1,300 for the first time since September 2010.
Also at LAT, "Fed's mixed messages roil markets," and Business Week, "Gold Walloped (Along With Pretty Much Everything Else)."
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